Carl J.D. Bauman and Margaret A. Bauman - Page 8

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          various specialties, including tax incentive investments.                   
          Potential investors were further advised that McIntyre’s                    
          experience in the coal mining business was limited and that                 
          McIntyre’s involvement as a general partner in other mining                 
          partnerships might compete with ERL for McIntyre’s time.                    
               Pursuant to the offering materials, 200 limited partnership            
          units were available to prospective investors.  The minimum                 
          investment was one unit per investor; however, McIntyre possessed           
          authority to issue fractional units to a maximum of 35 investors.           
          According to the terms set forth in the offering materials, the             
          capital contribution for each unit was $190,000.  This amount               
          consisted of $45,000 in cash and a promissory note in the amount            
          of $145,000 executed by each investor and payable to ERL.  The              
          cash portion of each investor’s capital contribution was payable            
          in three annual installments.  The offering materials explained             
          that each investor’s capital contribution represented his or her            
          proportionate personal liability for three recourse notes, which            
          were to be executed by ERL and payable to JAD, for advance                  
          minimum royalties due during the first 3 years of the lease.                
          Accordingly, the total capital contribution by limited partners             
          was designed to equal $38 million.                                          
               The offering materials contained a copy of the ERL limited             
          partnership agreement (agreement).  Pursuant to the terms of the            
          agreement, 99 percent of ERL’s profits and losses were to be                
          allocated to the limited partners.  The two general partners were           

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